How Resilient Were Small Businesses during the First Year of the Coronavirus Pandemic? A Look at What Happened to Established Business Owners and Lessons for the Next Crisis

Abstract

Using the panel feature of the Current Population Survey, we examine how the employment status of people who were self-employed business owners (working at least 15 hours per week in the business) in February 2020 changed over the following year, the first year of the coronavirus pandemic. We find that, in February 2021:

41 percent were no longer business owners working at least 15 hours per week, a higher percentage than during the corresponding months in 2018-2019. Business closures were greatest between February and April 2020, when the closure rate far exceeded that of February-April 2018.

15 percent were in business in a different industry, a percentage similar to that in 2018-2019.

26 percent were wage or salary workers (not self-employed), the same percentage as in 2018-2019.

11 percent were unemployed, our of the labor force, or unpaid family workers, a higher percentage than in 2018-2019.

4 percent worked less than 15 hours per week, a percentage similar to that in 2018-2019.
We also develop policy implications for the next crisis.

Keywords: small business, entrepreneurship, business owners, self-employment, COVID-19, coronavirus

JEL Classification: I18, J22, L26